I got this email from DJ Formaldehyde, including some excellent letters he wrote, and thought I would share them here:

Hi there,

First off, your site is fantastic. If it hadn't been for all of your hard work, I never would have been able to meet everyone at the Spirit reunion back in 2003.

I've been an internet DJ for over two years now and my show is heard Thursday nights at 9:00 pm on www.flashbackalternatives.com. 3 weeks of the month it focuses on Goth and Industrial from the 80's and once a month I play whatever I feel like playing. Since our station is in the U.S. we will have to close down if the March 2nd decision regarding royalty payments is upheld. I have written several articles on the subject, and I was hoping that you could share these with some of the people you are still in touch with. I know Earl Jive still does shows in the U.S., so its going to affect him as well.

My name is DJ Formaldehyde. My wife and I have hosted a show called “A Darker Shade of Retro” at www.flashbackalternatives.com for over two years. As an internet broadcaster as well as a musician, I need to raise awareness about an issue that is very close to my heart.

As of Friday March 2nd 2007, the Copyright Royalty Board announced new
royalty rates for Internet Radio stations in response to heavy petitioning by the Recording Industry Association of America. These rates are retroactive to
January of 2006, thus the future of internet radio is seriously threatened. Internet radio stations will be subject to much higher licensing fees, and these fees are proportional to the amount of listeners. One average, every station will have to pay 1.75 cents per listener per hour. In other words, a station that has an audience of 500 listeners will pay roughly $210 per day, or $76,000 per year, which is about 10 times more than what stations are paying now. This will force most internet stations off the air. It will have a negative impact on Bands, Indie labels and Campus Radio Stations as well. This of course, raises many questions.

First off, why is it that in the U.S. the body that governs the recording industry is allowed to govern or at least influence the rules of internet broadcasting. This is direct conflict of interest since in most countries, the task of governing broadcasting lies with one organization, while the process of collecting royalties on behalf of the artists fall to another. (In Canada’s case, the CRTC governs broadcasting while Socan represents publishers and artists). One has to ask why the RIAA is allowed to have so much power over the legislation of the broadcast medium, while at the same time they are able to protect their own interests. The argument most often given is that with declining CD sales and illegal downloading, other means of collecting revenues must be explored. This sort of action however, punishes those who are widening the exposure of new artists to potentially new fans and prevents it artists from promoting themselves through Internet Radio.

Many Internet radio stations have become instrumental in promoting new artists and independent record labels by helping them establish a fan base. Artists and labels need to be aware that this avenue of exposure is about to become a thing of the past. By imposing these high fees, only the high profile broadcasters such as AOL will prevail, and only the most mainstream programming will remain available. By making these fees retroactive to January 1st of 2006 every broadcaster will be left owing an unreasonable and unforeseen about of money to the Copyright Royalty Board, which will force most broadcasters into bankruptcy. To put things into perspective, popular stations with an average of 1,000 listeners currently pay about $1,500 to $2,500 per month to stay on the air. Now they will owe an additional $12,000 for each for each month they were on the air from January 1st of 2006, which is an amount that not even the best business plan in world could cover, and as a result, most will simply close down. Imagine what would happen your local cable company informed you that your rate has retroactively increased from $50 per month to $500 and you are left owing $5400. How would that even be constitutional?

This whole scheme does raise some questions. Why is the RIAA so motivated to shut down Internet broadcasting? Could it be due to complaints from commercial radio and satellite broadcasters that are losing listeners to internet stations that are being run by hobby DJs? Could it be due to pressure from record labels worried that it is easy to record music onto your computer while listening to an online radio station? Either way it seems like the RIAA has deliberately targeted internet radio stations in order to force them off the air.

From a personal point of view I can only draw the conclusion that the RIAA is trying to downsize the industry as a whole. Since the Alternative Revolution in the early 90’s the independent record labels have been able to do fairly well. The inception of www.myspace.com has enabled artists to promote themselves with ease. All they have to do is make a few tracks available for download, and if a music director of any station likes what they hear, they can simply include it into their stations programming. Where does that leave the RIAA under the old rules? They don’t get a cent because they didn’t do any work for it. And that is what the RIAA hope to change in my opinion. They want to change the rules by taking away any avenue of promotion that does not include the major labels, and once again keep the entire industry to themselves.

One of my biggest questions regarding this issue is: What will happen to terrestrial radio broadcasters who also stream their normal broadcasts on the internet? At the moment the amount of money a terrestrial broadcaster pays does not depend on the amount of listeners they have. They pay a monthly fee. They are not being punished for being successful. So why should the rules be different for Internet Broadcasters? At the very least, to make things fair, commercial broadcasters should be required to be paying the same rate as Internet broadcasters are, if they are streaming their programming on the Internet as well. But if that becomes the law, then that would put many campus radio stations in jeopardy as well. Their transmitters tend to be of low power and they especially benefit from using the Internet to reach more listeners. By being forced to pay for streaming Internet broadcasts on a “per listener” basis, most campus radio stations will have to give up that practice. And since the royalties owing are retroactive to January 2006, that would bankrupt most campus radio stations as well.

So who knows why the RIAA is going after the very institutions that are giving artists a wider audience. Why not go after big businesses that are not paying royalties the music that their customers are listening to while they are “On Hold”? In that case why not charge larger corporations more money as they have more customers on hold at any given time? Why not go after illegal Russian download sites that pose as legitimate? Why not go after night clubs that aren’t paying they play or don’t bother submitting playlists?

The argument of providing a fairer way of sharing royalties for artists is a completely invalid one. Artists are not getting their fare share of royalties anyway. Random samples of major radio station playlists are taken, and payments are calculated on that basis. Club playlists are rarely requested and campus radio playlists don’t seem to account for much of a difference. Internet broadcasters do submit their playlists like terrestrial broadcasters, but the manner in which they affect the way that royalties are paid out is minimal, due to their “insignificant market share”. Charting artists get the money first. While Internet broadcasters tend to exist by filling a void that regular broadcasters aren’t filling, the revenue they create for the RIAA is being primarily given to those who haven’t earned it in the first place.

Given these facts the days of Internet Radio seem numbered. There are of course things that can be done to attempt to revoke these new regulations. Regardless of whether you live in the U.S. or not, these rulings do affect you. So write as many letters to congress as you can in order to force an appeal.

It has come to my attention that there are some misconceptions about legitimate internet radio that have influenced some members of the public to support the recent decision of the Copyright Control board that will force most legitimate internet broadcasters to shut down.

Over the past week I have been spending a lot of time raising public awareness about our fight for internet radio. I have had several negative responses letting me know that we are “getting what we deserve”. This is based on the argument that that internet radio enables CD quality downloads of their shows which is in direct violation of copyright laws. That is why most of them support the idea of internet radio broadcasters being charged per listener rather than revenue based flat rate, like commercial terrestrial broadcasters are. This is simply not true.

It must be pointed out that licensed internet broadcasters in fact have very strict rules to follow. We are not allowed to offer any content to be downloaded. In fact we are required to put anti-stream-ripping software in place to prevent any attempts at recording our content. We are also required to record the ISP of the perpetrator and block them from ever logging on to our station again. We are also required to monitor the content of our chat rooms, in order to intervene if people are talking about sharing music with each other. If people do so, we are required to ban them from our station as well.

The reality is that Internet broadcasting in the United States is very strictly regulated. The majority of internet stations are run by radio enthusiasts who do it for the love of music. They spend a considerable amount of time and money on studio equipment, on broadcasting software, on anti piracy software and on bandwidth. Most don’t even come close to breaking even since they rely solely on donations by their listeners. The DJ’s on theses stations contribute programming on a volunteer basis and buy their own equipment as well, since they usually aren’t in the same city as the station. All of these people take what they do very seriously and follow the broadcasting regulations to the letter. If they don’t, they face stiff fines and in some cases, jail.

Internet stations in the United States that do make their programming content available for download are in direct violation of the broadcasting rules and are usually prosecuted. Hence, most stations that offer downloadable content are based outside of the US. In Europe for instance, Internet Broadcasting is still un-enforced and mostly lawless industry. I have spoken to European broadcasters and they share the opinion that most of the internet stations in Europe do not pay any royalties at all. Most of them do offer downloads of their programming.

People may support the Copyright Control Board’s decision with good intentions: to prevent unlawful copying of the broadcasting content, and therefore the artists music. However their means will achieve the opposite effect. Those of us who are paying our dues and following all the rules will be forced off air due to the fact that our royalty payments will be far greater than the revenue we can generate (in some cases 10 times more). Unlicensed stations from outside the United States will multiply to fill that void, thereby increasing the availability of downloadable content. The royalty pool will diminish, because the legitimate stations are no longer broadcasting, and foreign stations simply don’t pay royalties. The artists that supporters of the new royalty structure intend to protect, will end up with even less money than before.
While I respect everyone’s opinion, I do implore everyone to think this through before supporting the March 2nd decision.

March 7th, 2007
I was reading up on the \"non-commercial broadcaster\" clause in the new rates.
While a non-commercial broadcaster will to pay a flat rate of $500 per channel, the rules of qualitfying as a non commercial broadcaster have changed.
Under these new rules a non commercial broadcaster is given 159000 aggregate tuning hours. What the heck is that you ask? It means that you add up each hour that each listener is tuned in. In other words if you have one listener listen for a whole month, it works out to 720 aggregate tuning hours. An average of 220 listeners would give you: 158400 aggregate tuning hours. The risky part is that if you go over the tuning hour limit, you pay the commercial rate for the entire month. so if you have 10 more listeners for the month you pay the following: $.0011(royalty rate) * 16 songs per hour * 720 hours * 230 listeners= $2914.56.

So while you have 220 average listeners per month, you pay $500. You have 230 average listeners, now you owe $2914.56. How do you raise that kind of money from 230 listeners?

Anyhow, this is totally unacceptable, especialy since the Sound Exchange, who negotiated the new rates stated the following in 2006: \"Prior to the establishment of new rates, services making transmissions of copyrighted sound recordings after December 31, 2005 are required to continue paying royalties at the rates in effect for 2005.\" see http://www.soundexchange.com/licensee_home.html
Considering most people are now paying 10 times what they paid before, I don't see how such an increase can be constitutional.